I, too, have heard reports of his demise. All of which will lead to interesting times.
Arrafat was a terrorist bomb-tosser of the highest order. However, over the years he'd developed the ability to both not keep the hot-heads in check while being just enough of a calming influence to appeal to Europe. He'd sold them on the fact that only he could keep any semblance of peace.
What scares me is that he might be right. Because of his past, the Palestinian people respected him enough to keep him in power. The radicals were never able to get rid of him and completely go on the attack they way they wanted. Arafat was smart enough to realize that while many sympathized with him, too many pictures of blown up buses and kids were bad PR.
Or did he figure out a balance between terror and good PR? Letting the radicals commit attacks without killing too many Jews. And of couse not using his "influence" to stop the attacks the way he could have. Or using his power to find a peace agreement with Israel?
If it's the former, then there's every possiblity that the next leader will be either a figurehead who rules at the whim of the radicals and they'll start bombing and killing as many Jews as they can. And if anyone in the PA tries to stop them they'll just have that person replaced with someone who will cooperate.
If it's the latter, then perhaps a true moderate will be able to take over and, with the will of the average Palestinian, finally come to some type of agreement with Israel and we'll see peace. Along with using the will of the people to withdraw support from the radicals.
But, if I were going to be forced to bet, I would say it really doesn't matter how much Arrafat was helping or hindering the process. My bet is the radicals will gain control of the PA (they are the ones with the guns after all) and things are going to take a severe turn for the worse.